02 January 2013

Singapore Home Price Rose Again in 4Q2012

While we do expect a slower growth in Singapore Economy, yet the inflation rate in Singapore remains high due to higher Housing and Transport cost added to the residents. I cannot imagine if the inflation stay strong in longer period while the wage increase cannot catch up with the inflation in long run. It could increase Singapore political risk as getting more citizens unhappy with rising property prices as they have to bear with the living costs. While Singapore government is trying to use monetary policy to increase SGD conversion rate with its peers, it still cannot tame down the property price down, as this is due to the supply-demand theory, as a lot of people are parking their money in Property market instead of Fixed Deposit as the highest FD rate that we can find here is around 1.xx%, which is still lower than CPF-OA compulsory return rate (2.5%). People tend to cash out their CPF monies and invest in property market, as long as the return rate is lower than property rental yield, which I believe is around 3-5% now.

Nonetheless, I do expect a lot more citizens / working persons move to Iskandar Malaysia (IM) once the accessibility and security is improved. Currently there are hundreds of buses traveling in between IM and Singapore, where Woodlands Custom is having heavier traffic volume compared to TUAS custom due to cheaper toll fees (SGD1.20 compared to SGD3.80). However, it does not deter Expats (especially those with higher wage) from traveling in between IM and Singapore and send their kids to study in International School in Malaysia due to cheaper rates while having same standard with Singapore's. I believe we will see a difference once more foreigners are willing to buy a second home at relax in IM and go shopping in Singapore. This is a win-win strategy for both countries, I believe.

SINGAPORE - Singapore's home prices in the fourth quarter, which saw the strongest quarterly increase in 2012, raises further risks that the government will introduce new measures to cool the housing market, property consultant Colliers International said in a note.

According to preliminary data from the Urban Redevelopment Authority, Singapore's private home prices rose 1.8 per cent in the fourth quarter compared to the previous three months. The Housing and Development Board's flash estimate also showed resale prices of public housing units rose 2.5 per cent in October-December from the third quarter.

"The increased momentum in the quarter-on-quarter price up-trend, particularly in the mass-market housing segment, as well as the return of buying interest in the high-tier segments, are likely to keep the authorities high on guard again and have further heightened policy risks in the residential sector," said Colliers.

However, it noted that Singapore's private home prices rose 2.8 per cent for 2012, slower than a 5.89 per cent rise in 2011, indicating the government's cooling measures have been effective to a certain extent in moderating price growth.

CIMB Research continues to prefer developers who are less focused on Singapore's residential market, such as CapitaLand Ltd and UOL Group Ltd.

The brokerage expects demand to remain resilient in 2013, although larger supply of new homes and more discounts and residential launches could rein in prices and volumes.

CapitaLand shares were up 1.4 per cent at S$3.75 while City Developments Ltd was up 1.2 per cent at S$13.03. Property developers in Singapore outperformed the broader market last year, with the FTSE ST Real Estate Index jumping 47.6 per cent against the Straits Times Index's 19.7 per cent rise. - REUTERS

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